Cuba Inside View #14

Cuban Prime Minister Manuel Marrero Cruz has announced a pension increase with great fanfare.

Salaries remain the same. The majority of the public sector earns much less than 4,000 pesos.

How will this increase be covered if those supporting the pension system continue to contribute the same amount? Will state salaries rise?

The measure demands a 22 billion peso annual increase in spending from the already deficit-ridden social security budget.

Unbacked money printing (numbers in the database) can only result in:

• A greater cash crisis.
• An increased devaluation of the Cuban peso.
• Rising inflation.

Today, a pension of 1,538 pesos are $4. After this, we'll see how much 3,076 pesos are in six months and what can be bought with that. Because if there are more pesos and production remains the same, there is only one possible outcome.

This is an exclusively populist measure that solves nothing and makes everything worse.

The bad guys will be the same as always: the private sector, which raises prices as if that weren't the only possible outcome when the money supply increases and production declines. The 2021 Ordering Task was a disaster, and it seems they intend to fix that by doing the same thing in an Ordering Task 2.0.

I'm happy for the retirees who will see their pensions increased.
However, I'm worried that this will send the dollar to 500 pesos and inflation to another +50%.
Their joy will last less than the time it takes to wait in line at the bank to withdraw cash.

Posted Using INLEO